Construction News

Uncertainty Hits World Steel Industry

Steel manufacturers around the world are set to face lower levels of demand growth as structural issues impact emerging markets and China tries to rein in parts of its economy, a new report says.

Unveiling its short range outlook 2014-2015, the World Steel Association (worldsteel) said it expected the rate of growth in ‘apparent steel use’ to fall from an estimated 3.6 per cent last year to 3.1 per cent this year followed by 3.3 per cent growth next year.

Leading the way is China, where worldsteel expects growth in demand to plummet from an estimated 6.1 per cent in 2013 to 3.4 per cent in 2014 following Premier Li Keqiang’s declaration last month that the haze impacting major cities was ‘nature’s red-light warning against inefficient and blind development’ and that the country would ‘declare war’ on pollution.

Having consumed a whopping 700 million tonnes last year, China accounts for almost half (47 per cent) of world steel demand.

Meanwhile, with ‘structural issues affecting a number of emerging economies,’ growth rates will also moderate in regions such as Africa and Central and South America, worldsteel says.

On the brighter side, markets are being helped by a strengthening recovery in the United States as well as a bottoming out in Europe, though the effect of this is not enough to offset aforementioned headwinds.

“We continue to see challenges. The recovery in Europe is still only mild and constrained by high debt and unemployment. Structural problems in the emerging economies are less likely to be resolved in the short term leaving them fragile and susceptible to external shocks. We are still seeing unexpected unstable political situations in many emerging economies,” worldsteel economics committee chairman Hans Jürgen Kerkhoff said.

“In short, the global steel demand recovery continues but growth is stabilising at a lower rate with continued volatility and uncertainty leading to a challenging environment for steel companies.”

Around the world, steel manufacturers have been hit by falling prices amid weak manufacturing and construction conditions in Europe and continued oversupply. In 2013 alone, worldsteel estimates for global output of 1,607 million tonnes exceed its estimate of apparent steel use of (1,481 million tonnes) by a whopping 126 megatons or 7.8 per cent, with much of the excess supply coming from China.

Locally, meanwhile, while a painful restructuring program has seen BlueScope return to profit and Arrium is making small profits in its steel division, both continue to see subdued demand despite stronger building activity in parts of the country.